āOn this world nothing is definite however dying and taxesā mentioned Benjamin Franklin
(Founding father of USA and face on Americaās Ā 100 greenback invoice/be aware).
Advance tax, because the identify implies, is the tax that one pays prematurely. Advance tax is the earnings tax that’s payable in case your tax legal responsibility exceeds Rs 10,000 and ought to be paid in the identical yr through which earnings is acquired. It’s also referred to as as āPay as you Earnā scheme because you pay the tax in the identical yr through which you earn earnings.
If you’re a Salaried worker and have earnings apart from earnings from wage then you need to examine Advance Tax.
If you’re Freelancer, Professionals, companies, YouTuber, Blogger then it’s a must to know and pay Advance Tax
- Ā In case you estimate that you’ll owe greater than Rs.10,000 on March 31 Ā in taxes (after deducting TDS) then you need to pay advance tax.
- You pay this tax in 4 installments and the due dates with Proportion of Advance Tax to be paid are 15 June(15%), 15 September(45%), 15 December(75%) and 15 March(100%).
- If the Revenue Tax isn’t payable as per the above schedule, Curiosity is liable to be paid for late cost of tax as follows
- Curiosity below part 234B @ 1%Ā per thirty days
- Curiosity below part 234CĀ @ 1%Ā per thirty daysĀ is payable if 90% of the tax isn’t paid earlier than the tip of the monetary yr
- Advance Tax will be paid by submitting a Tax Cost Challan,ITNS 280.Challan
- Tax relevant: For particular person ChooseĀ 0021 : INCOME-TAX (OTHER THAN COMPANIES)
- Kind of Cost: Kind of cost is determined by why you might be paying earnings tax. Enter 100 for Advance Tax.
- You have to declare Advance Tax whereas submitting Revenue Tax Return ITR
Who has to pay Advance Tax?
The provisions of the Revenue Tax Act make it compulsory for each particular person, self-employed skilled, businessman, and company to pay Advance Tax, on any earnings on which TDS(Tax Deducted at Supply) isn’t paid. Each people, in addition to corporates, should pay this tax.
Advance Tax for Salaried Worker
If a personās solely earnings is his wage, then the employer will deduct tax from his earnings(TDS) and submit it. In such a case there is no such thing as a trigger for fear over advance tax cost. The tax deducted will probably be made obtainable to the worker by the employer in Type 16.
However when a Salaried worker has earnings apart from earnings from wage then he has to fret about Advance Tax. Ex earnings from different sources resembling curiosity gained (on saving checking account), capital positive factors, lottery wins, from home property or from enterprise, then advance tax turns into related.
If one estimates that one will owe greater than Rs.10,000 on March 31 Ā in taxes (after deducting TDS) then you need to pay advance tax.
Freelancers, Professionals, companies, YouTuber
Presumptive earnings for Professionals: Unbiased professionals resembling docs, legal professionals, architects, and many others. come below the presumptive scheme below part 44ADA. They must pay the entire of their advance tax legal responsibility in a single installment on or earlier than 15 March. They’ll additionally pay the whole tax due by 31 March.
Presumptive earnings for Companies: The taxpayers who’ve opted for a presumptive taxation scheme below part 44AD must pay the entire quantity of their advance tax in a single installment on or earlier than 15 March. Additionally they have an choice to pay all of their tax dues by 31 March.
Who doesnāt must pay Advance Tax?
Advance Tax is NOT relevant when
- A senior citizen (the resident particular person who’s 60 yrs or extra) who don’t have any earnings from enterprise & career, doesn’t must pay advance tax. This alteration was launched from AY 2013-14. Extra particulars at Senior Citizen : Revenue and Tax
- Ā If one adopts presumptive taxation then one has to declare earnings on the prescribed price and no different deductions are allowed. One has to pay your entire advance tax by 15 March. That is relevant forĀ
The way to discover if it’s a must to pay advance tax
As we all know there are 5 varieties of Revenue, Revenue from Wage, Revenue from Home Property(Any residential or industrial property that you simply personal will probably be taxed), Revenue from Capital Positive factors (Whenever you promote Mutual Funds, Shares, Bond, Gold, Land or Property, Revenue from Income and Positive factors of Enterprise or Occupation & Revenue from Different Sources. Particulars in our article Perceive Revenue Tax
For advance tax examine
- Revenue from Home Property: In case you have rental earnings.
- Revenue from Capital Positive factors: Have you ever bought Mutual Funds, Shares, Bond, Gold, Land, or Property. Ā Tax categorised as Lengthy Time period Capital Achieve Tax(LTCG) and Quick Time period Capital Achieve(STCG) is predicated on the asset you bought, the time interval you owned the asset. Particulars in our article Capital Achieve Calculator on Sale on Property, Mutual Funds, Gold, Shares
- Revenue from Income and Positive factors of Enterprise or Occupation: The earnings chargeable to tax is the distinction between the credit acquired on operating the enterprise and bills incurred.
- Ā Revenue from Different sources: Examine the following earnings. Particulars in our article Revenue From Different Sources
- the curiosity of Saving Financial institution Account,
- Curiosity from Fastened Deposit, Recurring Deposit, Senior Citizen Saving Scheme(SCSS) and many others
- Curiosity from Revenue Tax Refund
- Household Pension
- Dividend Revenue: Dividend acquired on or after 1 April 2020 is taxable within the arms of the investor/shareholder. Particulars in our article Dividend and Tax
What if we don’t pay Advance Tax?
If it’s a must to pay advance tax and In case you fail to pay your Advance Tax or, when you pay lower than the stipulated tax, you’ll be penalised and must pay further below Sections 234A, 234B, 234C. So there is no such thing as a escaping Tax. Ā Because the Revenue Tax workplace says āPay Tax Karo Loosen upā
The curiosity is calculated at 1% easy curiosity per thirty days on the defaulted quantity for 3 months. The curiosity penalty would proceed as much as the subsequent deadline. If even after the final deadline of 15 March, the tax isn’t paid, then the 1% could be on the defaulted quantity for a month, till the tax is totally paid.
Why Pay Advance Tax?
Advance tax is among the main instruments utilized by the Govt. to gather tax from theĀ assesses throughout India. This pay as you go type of tax is designed in such a means that an assessee is made to pay tax to the Govt. in a āPay as You Earn Schemeā. This primarily goals at decreasing the last-moment hassles to an assessee for cost of tax legal responsibility which can be due to both scarcity of time or funds.
The goal of the Indian authorities behind organising the advance tax system was to hurry up the tax assortment. This method additionally allowed the federal government to earn curiosity on the quantity collected as tax, thus growing funds to the federal government coffers.
How is advance Tax Calculated?
Advance tax is computed on earnings that a person may earn throughout the yr, Ā in that sense, it’s estimated earnings. The tax is calculated utilizing the charges relevant for the monetary yr.
Suppose after paying your first installment of tax on the estimated earnings, your precise earnings elevated as a consequence of some shares/mutual funds you bought, You have to to revise your earnings and accordingly pay the differential within the subsequent installment.
Though Advance TaxĀ is liable to be paid on all incomes together with Capital Positive factors, it’s tough to estimate the Capital Positive factors which can come up in an yr. Due to this fact, in such circumstances, it’s supplied that if any such earnings arises after the due date of any installment, then, your entire quantity of tax payable on such capital achieve (after claiming exemption below part 54) shall be paid in remaining installments of Capital Positive factors that are due. If your entire quantity of tax payable is so paid, then no curiosity on late cost will probably be levied
Listed beneath are the steps to calculate advance tax:
- Decide the Revenue:Ā Decide the earnings you obtain apart from your wage. Itās necessary to incorporate any ongoing agreements that may pay out later.
- Minus the Bills:Ā Deduct your bills from the earnings. You possibly can deduct bills associated to your work (freelancing) resembling hire of the work place, journey expense, web and cellphone prices.
- Complete the Revenue:Ā Add up different earnings that you simply may obtain within the type of hire, curiosity earnings, and many others. Deduct the TDS deducted out of your salaried earnings.
- Complete Advance Tax:Ā If the tax due exceeds Rs.10,000 then you definatelyāll must pay advance tax.
Advance tax Charges and Dates
From FY 2016-17Ā Ā For each particular person and company taxpayers
| Due Date | Advance Tax Payable |
|---|---|
| On or earlier than fifteenth June | 15% of advance tax |
| On or earlier than fifteenth September | 45% of advance tax |
| On or earlier than fifteenth December | 75% of advance tax |
| On or earlier than fifteenth March | 100% of advance tax |
Beneath are the dates and percentagesĀ earlier than FY 2016-17.
| Due Date | Installment % of Advance Tax |
| fifteenth September | Up-to 30% |
| fifteenth December | Up-to 60% |
| fifteenth March | Up-to 100% |
For instance, suppose your whole tax legal responsibility(after deducting TDS) Ā for this yr is Rs 1,00,000
So by fifteenth JuneĀ you will have to pay 15% which involves Rs 15,000
So by fifteenth September you will have to pay 45% which involves Rs 45,00
By fifteenth December you’ll have to cowl 75%, so you will have to pay one other Rs 75,000.
By fifteenth March, 100% of advance tax involves Rs 100,000, you will have to pay one other Rs 25,000.
Penalty on not paying/paying much less Advance Tax: Sections 234A, 234B and 234C
In case you owe greater than Rs.10,000(after deducting TDS) whereas submitting your returns, you can be penalized with Ā Curiosity below sections 234A , 234 B & 234 C
Beneath Part 234C, there are three parts. For the primary instalment, the shortfall penalty is calculated for 3 months @1% p.m. Equally, within the second instalment, the shortfall penalty can also be calculated for 3 months @1% p.m and the ultimate instalment is calculated at a flat price if 1% for 1 month solely.
Beneath part 234B, penalty arises when the whole quantity of advance tax paid together with the quantity of TDS is lower than 90% of the whole tax legal responsibility. In such a case, curiosity is calculated at 1% per thirty days of the quantity of shortfall for the time interval from April to the month through which the return is filed.
Beneath part 234A, the legal responsibility arises solely when the return is filed after the due date which for AY 2020-21 is 30 Nov.
Finotax has nice Advance tax calculators. Test it outĀ right here.Ā Letās take a look at these sections intimately.
Curiosity below part 234 C
234 C will probably be relevant when you donāt pay your advance taxes in common installments. Ā As per the Revenue Tax Act, youāre alleged to pay 15% of advance tax by 15 Jun, 30% of your advance tax by fifteenth Sep, 60% by fifteenth December and 100% by fifteenth March. Letās see it via some examples.
Mr. Khushal is operating a clothes store. Tax Legal responsibility of Mr. Khushal is Rs 45,500. HeĀ has paid advance tax as given beneath:
Rs. 8,000 on fifteenth June,Ā Rs. 11,000 on fifteenth September,Ā Ā Rs. 12,000 on fifteenth December,Ā Ā Rs. 14,500 on fifteenth March. Ā Is he liable to pay curiosity below part 234C, if sure, then how a lot?
Any tax paid until thirty first March will probably be handled as advance tax.Ā Contemplating the above dates, the advance tax legal responsibility of Mr. Khushal at totally differentĀ installments will probably be as follows:
1) In first installment: Not lower than 15% of tax payable ought to be paid by fifteenth June.Ā The tax legal responsibility is Rs. 45,500 and 15% of 45,500 quantities to Rs. 6,825. Therefore, heĀ ought to pay Rs. 6,825 by 15thJune. He has paid Rs. 8,000, therefore, there is no such thing as a quickĀ cost in case of first installment.
2) In second installment: Not lower than 45% of tax payable ought to be paid byĀ 15thSeptember. Tax legal responsibility is Rs. 45,500 and 45% of 45,500 quantities to Rs.Ā 20,475. Therefore, he ought to pay Rs. 20,475 by fifteenth September. He has paid Rs.Ā 8,000 on fifteenth June and Rs. 11,000 on fifteenth September (i.e. whole of Rs. 19,000 isĀ paid until 15thSeptember). There’s quick cost of Rs. 1,475 (i.e. Rs. 20,475 ā RsĀ 19,000).
Although there’s quick cost of Rs. 1,475 however Mr. Khushal won’t be liable toĀ pay curiosity below part 234C as a result of he has paid minimal of 36% of advanceĀ tax payable by fifteenth September. He has paid Rs. 19,000 until fifteenth September andĀ 36% of 45,500 quantities to Rs. 16,380. Therefore, no curiosity shall be levied in case ofĀ deferment of second installment.
3) In third installment: Not lower than 75% of tax payable ought to be paid by fifteenthĀ December. Tax legal responsibility is Rs. 45,500 and 75% of 45,500 quantities to Rs. 34,125.Ā Therefore, he ought to pay Rs. 34,125 by fifteenth December. He has paid Rs. 8,000 on fifteenthĀ June, Rs. 11,000 on fifteenth September and Rs. 12,000 on fifteenth December (i.e. whole ofĀ Rs. 31,000 is paid until 15thDecember). There’s a quick cost of Rs. 3,125 (i.e.Ā Rs. 34,125 ā Rs 31,000). Therefore, he will probably be liable to pay curiosity below partĀ 234C on account of quick fall of Rs. 3,125 (*).
There’s a quick fall of Rs. 3,125 in case of third installment. As a consequence of quick fall in case of third installment, curiosity below part 234C willĀ be levied. Curiosity will probably be levied at 1% per thirty days or a part of the month on the quick paidĀ quantity of Rs. 3,100 (i.e. Rs. 3,125 rounded off to Rs. 3,100 as per Rule 119A). CuriosityĀ will probably be levied for a interval of three months. In different phrases, curiosity will probably be levied on Rs.Ā 3,100 at 1% per thirty days for 3 months. Curiosity below part 234C will come to Rs. 93.
4) In final installment: 100% of tax payable ought to be paid by fifteenth March. The fullĀ tax legal responsibility of Rs. 45,500 is paid by Mr. Khushal by fifteenth March (i.e. 8,000 on fifteenthĀ June, Rs. 11,000 on15th September, Rs. 12,000 on fifteenth December and Rs 14,500Ā on fifteenth March). Therefore, there is no such thing as a quick cost in case of final installment. Thus,Ā Mr. Khushal won’t be liable to pay curiosity below part 234C in case of finalĀ instalment.
Curiosity below part 234 B
234 B will probably be relevant when the whole advance tax paid is lower than Ā 90 % Tax Payable. Ā This will probably be charged at 1% per thirty days until you pay your remaining taxes. Letās work it out via an Instance:
Mr. Suraj is a businessman. His tax legal responsibility as decided below part 143(1) is Rs.Ā 28,400. He has not paid any advance tax however there’s a TDS credit score of Rs. 10,000 in hisĀ account. He has paid the steadiness tax on thirty first July i.e. on the time of submitting the return ofĀ earnings. Will he be liable to pay curiosity below part 234B, if sure, then how a lot
On this case, the tax legal responsibility (after permitting credit score of TDS) of Mr. Suraj involves Rs.Ā 18,400 (i.e. Rs. 28,400 ā Rs. 10,000) which exceeds Rs. 10,000 and therefore, he will probably beĀ liable to pay advance tax.Ā He has not paid any advance tax and therefore, he will probably be liable to pay curiosity below partĀ 234B. Curiosity below part 234B will probably be levied at 1% per thirty days or a part of the month. InĀ this case, Mr. Suraj has paid the excellent tax on thirty first July and therefore, curiosity below part 234B will probably be levied for the interval from 1st April to thirty first July i.e. for 4 months.Ā Curiosity will probably be levied on unpaid tax legal responsibility of Rs. 18,400. Curiosity at 1% per thirty days onĀ Rs. 18,400 for 4 months will come to Rs. 736.
In case you pay our taxes in between April ā July interval then curiosity @1% will probably be utilized solely on the steadiness tax payable .
On-line Advance Tax Calculators(Free)
Video on Advance Tax
This 8:32 video explains Advance Tax.
This video talks about find out how to Calculate Advance Tax
The way to pay advance Tax?
You possibly can pay advance tax in India via two strategies: on-line or offline. Right hereās a breakdown of each:
On-line Cost:
- Go to the Revenue Tax Divisionās e-payment web site: [income tax e payment ON Income Tax Department portal.incometax.gov.in]
- Enter your PAN and cellular quantity and proceed after verification with OTP.
- Choose the Evaluation 12 months (2024-25 for present state of affairs) and select āAdvance Tax (100)ā below Kind of Cost.
- Fill within the challan particulars like State Code, circle code (refer web site for particulars).
- Select the cost technique (internet banking or debit card) and your financial institution.
- Preview the challan for accuracy and click on āPay Nowā to finish the cost.
Offline Cost:
- Obtain Challan 280 kind from the Revenue Tax Division web site.
- Fill the challan with particulars like your PAN, evaluation yr, tax sort (100 for Advance Tax).
- Point out the installment quantity (is determined by the due date).
- Submit the finished challan at any financial institution approved to gather tax funds.
Further Suggestions:
- Use an advance tax calculator to estimate your tax legal responsibility for correct cost.
- Make a copy of the challan (on-line cost receipt or Challan 280 copy) for record-keeping throughout ITR submitting.
- The final date for the present installment (March 2024) is March fifteenth, so make sure you pay earlier than the deadline to keep away from curiosity penalties.
Advance Tax will be paid by submitting a Tax Cost Challan,ITNS 280.Challan, at designated branches of banks empanelled with the Revenue Tax Division. Branches of ICICI, HDFC and SBI settle for Advance Tax Cost Challans. Alternatively, people may pay Advance Tax on-line via the Revenue Tax Dept / NSDL web site. e-Cost facilitates cost of direct taxes on-line by taxpayers. To avail of this facility the taxpayer is required to have a net-banking account with any of the Licensed Banks.
Video on The way to Pay Advance Tax
Confirm Advance Tax in Type 26AS
Half C of Type 26AS hasĀ particulars of Tax Paid (apart from TDS or TCS). In case you have paidĀ Advance Tax or Self Evaluation Tax itĀ will seem on this part.Ā Ā Please confirm that advance tax or self evaluation tax particulars are displaying up in Type 26AS, In the event that they donāt match along with your particulars please contact the Financial institution.
Present Advance Tax in ITR
After paying earnings tax via Challan 280 what subsequent? Is your duty over. No. It’s worthwhile to present the tax paid in your ITR,Ā In case you have paid Advance/ Self Evaluation tax via Challan 280 fill within the particulars in Tax paid and make it possible for your tax legal responsibility is 0 earlier than submitting the returnĀ as defined for ITR1 in our articleĀ Fill Excel ITR1 Type : Revenue, TDS, Advance TaxĀ and proven in picture beneath.
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Do you pay Advance Tax?
